Hey everyone. This is Kirk here again from optionalpha.com and welcome back to the daily call. Today, we are going to be talking about the basics of a reverse stock split. Yes, a reverse stock split which is a little bit different than a traditional stock split. It's important that you understand the difference between them and more importantly, how they generally will affect options if you are trading options in a company or an ETF because ETFs can go through reverse stock splits as well and what the impact is on options. First of all, on the basics – Why do companies do a reverse stock split? What is a reverse stock split? The basic premise of a reverse stock split is that the company or the owner of the ETF wants to reduce the number of outstanding shares or float that they have. They might do a reverse stock split by dividing the current shares by a number such as 5 or 10 or 4 or whatever they want to do. In that case, it would be generally called a 1 for 5 or 1 for 10 split, respective of how they want to split up the company. For example, if a company let's say is trading at $.20 a share and they've got $200 million shares outstanding, if they do a 1 for 10 reverse split, it would basically cut the number of shares from $200 million down to $20 million and then effectively, the price would go up by a factor of 10, so the price actually increases by a factor of 10 to $2.

Now, of course, in this case, it's really just smoking mirrors kind of game. Most companies that do this, either their stock price is falling really, really fast and they don't want to have any influence on this low stock price, so they do a reverse split to get the price back up. Now, effectively, the company is not changed in their market capitalization and how much they're worth. It's the same company. It's just how the shares are divided up. If you even think about Berkshire Hathaway and Warren Buffett's company, they've never split the stock, so there's not a lot of float, there's not a lot of shares. That's why the share price is so, so high for Berkshire. But some other companies, if they get towards that penny stock range and in some cases, they have to meet minimum bid requirements to be on the NYSE or the NASDAQ, they'll do a reverse split to get their price back up. Again, it doesn't change the company. The company maybe still is not doing well or declining and really, the stock price is taking a hit. But it looks like to investors, it's more valuable. That's why you can't always I guess in this case, judge a book by its cover. The stock price is really meaningless unless you look at how much float and how many shares are outstanding for that company and really, what the total market capitalization is.

Now, in the case of stocks, ETFs can go through reverse splits as well. The one that's more commonly going to have this happen is VXX. VXX has gone through a reverse stock split many, many times before in the past and the reason it does is because it is always dragged lower by this negative drag in just its pricing. It's going to continue to go through reverse splits time and time again and in most cases, it does like a 1 to 4 or 1 to 5 reverse split. When that happens, if you're holding options, what's interesting about VXX and some of the other ones that reverse split is that the option contracts themselves don't necessarily reverse split. What most of the exchanges will do and more importantly, the OCC wants to do is they want to keep those option contracts on a pre-split "new contract" so that there's no extra clearing requirements that the exchanges have to deal with. In the case of VXX, let's say they do a 1 for 4 split. Well, if one option contract used to control 100 shares, now, one option contract would only control 25 shares. What they would do is they would basically have these new contract symbols traded. I think what they actually did back in August of 2017 is they had a new symbol called VXX2 and that new symbol was set to 25% of the VXX price. Again, it leaves option traders without some lingering half contracts or quarter contracts if you didn't have an even number of contracts that got split and it really makes it super, super simple for the clearinghouses.

Again, the whole idea though is just to understand how reverse stock splits happen, again, that they can happen on the ETFs, they can affect the option pricing. There's usually a lot of memos that go out before a reverse stock split actually happens. If you are trading something and you see a huge jump in price, don't be totally alarmed by it. It could be a reverse stock split. Everything is basically the same. It's just a new price. It might be a little confusing at first, but I think you'll be able to navigate it pretty quickly. As always, hopefully this helps out. Until next time, happy trading!

Hey everyone. This is Kirk here again at optionalpha.com and welcome back to the daily call. Today, we are going to talk about how you can increase long exposure of your portfolio very quickly. The first question here is always, "If you're needing long exposure, how much?" When I look at my portfolio and I Beta weight it to a market index like the S&P or the DOW or whatever you want to use for Beta weighting, the question I always ask is "Am I outside of my breakeven points for expiration?" That's the main thing I'm really focused on, is "How unbalanced am I at this exact moment?" If the market is rallying, but I'm not outside of my breakeven points, okay, maybe I'll start doing some things that slowly start to improve the balance of my portfolio, but I don't need to trip over myself and I don't need to overextend or over-adjust my portfolio for the sake of balance. I'm fairly balanced. It's always going to be a moving target. Balance is never something that's absolutely emphatically perfect because the market is always moving. You're always making small tweaks and small adjustments to follow the market.

Now, if you're just inside of your breakeven points, so you haven't breached your breakeven points, then I would start using credit put spreads or I would start using debit call spreads. Basically, I would start using anything spread like, preferably option-selling first and then option-buying after that, to be able to make long exposure increased in your portfolio. If you do credit put spreads, you'll be selling options. If you do debit call spreads, you'll be buying options typically around at the money strikes. In either case, you'll slowly start to adjust your long exposure in your portfolio. Again, it won't be overkill at that point, but it'll slowly start to make adjustments. Now, if you are outside of your breakeven points and let's say the markets had a huge move or you just have completely the wrong positions on at any given time and now, you're totally lopsided, you need the market to go down dramatically. Every day that market continues to move up is a bad day for your portfolio and what you need to do is you need to be a little bit more aggressive with this. In this case, you need to do something like doing long stock in maybe the major market index or ETF that you follow as just a temporary hedge, so maybe you do need to buy some stock in that case and get some really, really long exposure or you need to buy some in the money or at the money calls or make really wide debit call spreads. In either case, you're trying to maximize your positive Deltas in your portfolio. And so, the more positive Deltas you can get in your portfolio, at least for the time being to give yourself some balance in case the market does continue to move higher against your portfolio, that's what you need to do.

Again, it always comes down for me, "How far outside of the breakeven points am I or not?" If I'm really far outside of it, then I need to be really, really aggressive in making adjustments and getting new positions on that increase positive Delta for my account or even in some cases, removing negative Deltas. If you've got some short calls that are in the money or just in the money, maybe hedge those with a long call option and create a spread. That will reduce the pain if the market does continue to move higher against your position. It will reduce the drawdowns if the market continues to move higher against your position. Hopefully this helps out. As always, I suggest to use an analyzer or some sort of portfolio platform to take a look at your balance and make sure that you're still good and analyzing trades before you get into them. But this is why balance become so important and it's something that you should often look at, so that you don't find yourself just one day waking up to a completely unbalanced portfolio with no time to adjust. As always, hopefully you guys enjoy this. Until next time, happy trading!

Hey everyone. This is Kirk here again at optionalpha.com and welcome back to the daily call. Today, we are going to be talking a little bit more about our new auto-trading platform for options. As we've hinted to and alluded to many, many times before in the past, we are now in the final stages. We're probably about 30 to 45 days out here from releasing our new auto-trading platform for traders. Again, this is revolutionary software that we're going to be releasing. Nobody has this. No broker, no website, no hedge fund. Nobody has what we're building. It's completely proprietary to us and I wanted to give you some of my thoughts on why we're doing this and what it will look like in the future. Now, of course, we're going to be adapting and changing this thing on-the-fly, on the move if you will with feedback that we get from our users. There's kind of a core foundation to this platform and this technology that we've built and of course, we want to get a lot of feedback from users and once we start releasing that software to our elite and our lifetime members first, I'm sure we're going to get some ideas and some feedback on how we can improve and tweak the system to make it a lot better for you guys.

But the whole idea behind our new auto-trading platform is really to reduce the time drag that you guys have in trading options. Now, I've known that this is an issue for many years. In fact, I talked about why auto-trading is going to be the future of options trading almost a year and a half ago in a weekly podcast that we did. But the reality is that more than 90% of the trading that happens in the market is done by computers and I'm not just saying computers that we are using to then manually click. I think that a manual click or a manual entry is going to be a thing of the past. It's going to be something that we'll look back on and wonder to ourselves, "I can't believe we used to do that." It's probably like making a phone call and having an operator on the other end connect you to somebody else. It's going be that archaic in a couple of years. And so, we want to be on the forefront of that and we want to be a leading factor in making sure that whatever auto-trading platforms that are built are built with the scalability and with the functionality that can facilitate and manage basically anything that your mind can come up with or can create.

Our auto-trading platform is going to be very, very user-friendly to people who are coders, but then also to people who are not. We're going to have a lot of templated strategies in there that you can use based on our back-testing and research. But then if you do have the ability to then code or your own strategy, you'll have full functional capacity to code your own strategy in our platform. That's really cool because now, what we can start to get into is this crowd-sourced development of trading ideas. What I've wanted to do for a long time is I wanted to tap into the resources and to the knowledge that we have in the Option Alpha community. We've got nearly 100,000 traders in our community and by far, that's probably one of the biggest options communities out there and we know that we've got a really smart very successful traders. Well, now, we can start tapping into that by creating bots around those strategies and people can choose to share their bots publicly with the rest of the community. If Joe creates a bot and that bot does really well and that trading strategy is performing very well because we can all see the stats of that… We can't see his account and how much money he has in his account. We keep all of the things private that need to be private obviously. But as far as returns and win rates and drawdowns, we can see that and from one click, we can go over a copy or clone that bot that Joe is trading and then confirm and trade it on our own account.

That type of crowd-sourced options trading knowledge and development is something that we've never seen in the market before. People have tried to replicate it. People have tried to do something very similar. But the functionality to be able to mimic somebody else's strategy with an automated trading robot, a computer basically algorithm that does it for you from one single click to clone it over in your account is again, something that nobody has ever created. This revolutionary software is going to make sure that you can trade highly effective strategies at the right time without having to monitor the markets at all. And so, my goal in building this out has always been to have these bots find trades, place them and then manage them for us, the complete cycle, not one or the other. This is not a system that just finds trades and sends you email alerts. It is truly an automated trading platform, meaning that these bots that we create and these templates that we'll have in there that you can clone and adjust and tweak at your wishes really basically can find trades. It's always scanning, always monitoring the market for that perfect opportunity for whatever that trading strategy is that you're working on. It will enter and execute the trades. It will then monitor the trades for your exits. If you set exit profit targets at 50% or a stop loss at this or you need to have the bot make adjustments, it will do all of that for you. It's totally hands-off.

Now, of course, it's going to be a learning curve and we'll have some more training and some more information and courses that we're going to be developing as this starts to roll out, but this is the ground floor of this new technology for trading and I've always said that I think in most cases, the option industry seems to be behind the technology curve when it comes to new technology that comes out in regular markets, like a new Siri technology or a new voice recognition technology, new facial recognition technology. All of that stuff, we are still behind in options trading. We're still archaically manually clicking and choosing what we trade and what strikes we select. That stuff can be automated. You do not have to do that anymore and that's our goal, is to make sure that you basically get your life back, you get time back while also setting yourself up for success with a completely automated and fully functional options trading system using these bots. Again, we'll have information as we get much, much closer to the release, but I'm just so excited about it, I have to keep telling you guys about it and get everyone juiced up and jacked up about what we're doing because it's truly going to be a stepping stone in the future of trading technology. It's going to be a data point when somebody looks back in the past and says, "That was the day that Option Alpha changed the entire game and everybody started going to that model, everybody started gravitating towards an auto-trading model." I want to be the first that releases that in the future. Now, again, you can just stay on our email list or on our social channels to get updates on when we officially launched.

The biggest difference in officially launching for us is going to be the extinguishing of our lifetime program. We have in the past had a lifetime elite program where if somebody wanted to just join our community, it was a one-time fee and you basically join and you got everything. You got all of our software, all of our research, anything that we have now or in the future and you join at basically the highest level. Well, once that auto-trading platform gets released here in the next 30 to 45 days, that program is going to be going away and the reason it's going away is because as we release auto-trading and have to build up servers to be able to handle this capacity, we are no longer going to be able to offer a one-time cost or one-time investment to get into the auto-trading platform. If you want to get everything that we have now, all the research we have, all the software that we have and access to auto-trading basically for a one-time investment for the rest of your life, you have to get into it at this level now. You cannot wait because once we release it, lifetime is going away.

Now, of course, we'll keep our promise and that's big for me, is that we're going to keep our promise to all the people who are in lifetime. They're going to get the auto-trading platform totally for free, no additional cost required, but everybody else after that point is just going to have to pay the monthly fee that's associated with the membership level that they want for auto-trading. Now, of course, we'll have different various membership levels as it releases and you'll be able to pick and choose how active you want to be, how many bots you want to create, if you want to do single bots versus a portfolio of different tickers. All of that stuff will be things that you can choose and pick and we want to give you guys, no pun intended, but a lot of options in that. But we cannot anymore after it's released, just have a one-time cost for membership into the platform because we have server cost and we have data cost and we have all these things that go into it that we need to make sure that we cover, so that the system is sustainable for many, many years going forward into the future. As always, if you have any questions or comments, just let me know. Until next time, happy trading!

Hey everyone, Kirk here again at optionalpha.com and welcome back to the daily call. Today, we are going to be answering another user question and basically, actually, it's a question that we get all the time, but we just recently got it from a user and that is how to create an iron butterfly on Thinkorswim's platform. Thinkorswim and TD Ameritrade, that's the platform that we've used for a long time, still the platform that we are going to use when we roll out our auto-trading software. We'll be connecting directly with TOS and TD Ameritrade, so if you have a brokerage account there, you'll be eligible I guess to do the auto-trading. If you don't, you want to get a brokerage account there, head on over to optionalpha.com/TOS.

Inside of Thinkorswim though, they don't have the ability to directly do an iron butterfly the way that we typically define an iron butterfly which is basically short strikes at the same strike price like a straddle, so basically it's a synthetic straddle and then long strikes out on either end. What you have to do is you have to do it two different ways. I'll explain the two different ways that you can do it here on today's daily call. The first way that you can do it is you can add an iron condor order to your position screen or trade screen and then manually readjust the strike prices as you see fit. Right now, the S&P at the time that I'm recording this is basically around like 275, 270 ish. And so, if you wanted to add an iron condor, you could just right click on any of your short strikes that you want, go over to sell and then iron condor and that would bring up an iron condor order and then you could manually just change the inside strikes to be the same. If you want to do a 275 iron butterfly, you change the short strikes to 275 or 270, you change the short strikes to 270. That's one way that you can do it. It's a little bit more clicky and you have to just double check yourself when you do that. That's one way you can do it. It's not my preferred way.

Inside of Thinkorswim, one of the cool features that they have as far as shortcuts is you can use in my case, the CTRL key on a Mac, but I think it's the same on a PC. You can use the CTRL key and you could hold that down and then manually click all of the strike prices that you want and it will automatically associate that trade together. As long as you're holding down that CTRL key when you're clicking different strike prices, it will automatically associate all those strike prices that you clicked into one single order. What I like to do is I just like to hold down the CTRL key, manually select the bid on the short inside legs, so that's in this case, I would do the 275 iron butterfly. I would hit the bid at 275 on the call side, hit the bid at the 275 on the put side and then I would buy the asks on either end. I would buy say the 265 on the put side and the 285 on the call side. As long as I'm holding down the CTRL key, it will just automatically associate these trades together. Now, it's a little bit… You got to get over that learning curve of just holding down the keys and making sure clicking the bid versus the ask to buy and sell. But once you get over that, honestly, you do it two or three times, you're good to go and it's much, much faster to be able to do this.

Now, all of this is still manually clicking, so once we roll out our auto-trading platform, you guys won't have to do this anymore. It can all be setup automatically with a bot and the bot will figure out the strike prices, enter the trade, manage it, exit the trade if needed, all automatically for you. That's what I'm really looking forward too as well. But if you're still trading on Thinkorswim, you're still doing this manually, that's how you create an iron butterfly on their platform. Until next time, happy trading!

Hey everyone, Kirk here again and welcome back to the daily call. Today, we're going to be talking about the only two things that you can control in the stock market. I will come out right away and tell you exactly what those two things are. The only two things you can control in the stock market is the underlying in which you trade or the security and the strategy or the technique in which you trade it. That's it. Now, this might come as actually a shock to some of you guys because many people still think that they can control the market. You either try to do it… I don't know, like Jedi mind tricks or move the market with your mind. You stare at the screen so much until your eyes bleed because you want the stock to go up or down. But I have learned a long time ago that we have no control on price and direction. The only things that we can control are the underlyings in which we trade, the tickers in which we trade and the strategy in which we trade them. That's it. Everything else is out of your control. The political environment, what this country does or what that company does or what Amazon versus Tesla does. None of that stuff you guys can control. Unless you're leading those companies, you have absolutely no control over where the market goes, where the economy goes, where the stocks go, where bonds go. We have no control over that. And the sooner that you realize and accept that, the better off you're going to be because you're not going to worry about it and because you're going to focus, re-shift your attention onto the things that you can control.

If you can control the underlying, great, what underlyings are you trading? Are you trading a diversified basket of tickers or are you focusing all of your attention on just one ticker which is a bad idea? And then on a strategy, what type of strategy are you using? Are you buying options which doesn't work? Are you selling options which does? Are you properly position sizing? Are you keeping your position small and increasing your frequency? Do the things that you can control and don't worry about everything else you can't control because not having control for direction or the economy or bonds does not matter when it comes to options trading. It doesn't matter because we frequently will reset strategies every 30 days. If the market starts to go down or if the market starts to go up, we're constantly resetting strategies and improving frequency. That's why direction is meaningless when you trade options and you do an option selling strategy the way that we do. Direction becomes meaningless. It doesn't mean that direction can't hurt your position. Of course if you have a huge down or a huge up move and it's unexpected, of course, you're going to have a little bit of a setback, but it's not going to change the outcome of the strategy, it's not going to derail you from being successful trading. Control the things you can control. Don't worry about everything else. Hopefully this helps out as always. Until next time, happy trading!

Hey everyone, Kirk here again and welcome back to the daily call from Option Alpha. Today, we are going to be talking about why when you trade options, patience pays five times more over time. Now, I think the easy and simple way to describe this is to use the analogy of reaping what you sow. Basically, the concept here is when you plant or when you're a farmer and you start to plant seeds or crops, it takes a long time for those crops to mature. You have to patiently wait for them. You plant, you water, you're watering, you're watering, you're waiting, you're waiting and then boom! It's like overnight, they pop. And then after they pop, then they just go bananas. We see this in our area where we live. There's a lot of cornfields. It's truly like I didn't think I'd ever live in an area like this because I grew up in Northern Virginia and DC and lived in New York, so that was totally different to me. But now, there's a lot of cornfields and man, when you see the corn pop out of the ground, it literally feels like the next day, it's like four feet tall. It goes bananas once it actually starts to mature and hit and gain some traction.

I think this concept is very, very similar in options trading. Options traders I think… Let's say the default options trader who is new to trading thinks that when they place a trade, immediately like snap of a fingers that it's going to be profitable two days or three days later. That's why people actually are very, very attracted to weekly options in most case because they feel like they could get quick profits. They want quick money. They want to get rich overnight. The reality is that patience in options trading pays way more to just wait for profits to come to you. Our whole framework is built upon selling options and then sitting back generally and waiting for time decay and IV's over-expectation to play out, to basically mature over time. We know that option pricing and most pricing is generally fair and efficient at the time of trade entry. At the time of trade entry, there's no real edge that can be gained in the market, there's no arbitrage opportunity that you can gain. Where the opportunity comes is by sitting back and waiting for pricing to mature.

I talk about pricing maturing all the time because that's what happens. Volatility is not as high as people expected on trade entry, you also have time decay, the market doesn't move as far as people expected. All of this stuff works out in favor of the option seller long-term, so that's why we just have to be patient. You just have to sit back a little bit more and wait for the corn to grow. That's really how I think about it. Hopefully that helps out. Again, just be more patient. Try to be more patient with your strategies. Realize that it's not an overnight get rich quick type of thing. It's a long-term wealth building process and that takes time. That's why it's called a long-term wealth building process because it takes time. Sit back and wait for the corn to grow. Until next time, happy trading!

Hey everyone. This is Kirk here again from Option Alpha and welcome back to the daily call. Today, I'm answering the question, "How much money do you need to start trading options for a living?" This a big topic that we get all the time. People want to know, "How can I start trading options? How can I generate a living, an income from trading options?" I think it's a challenging topic for me to broach with people because frankly, there's a lot of misconceptions out there and a lot of stuff online that you see that just really isn't that true. And so, when I unfortunately have to tell people how much money they need to generate whatever income they're looking for, it's kind of shock. Unfortunately, I don't always want to be that person that gives them the shock, but I'd rather be the person that tells them honestly and upfront where they are. In most cases, that leads a lot of people away from us, meaning that they just don't think they can ever get to that point or they'll ever get to that point, so they just give up which I don't think is a good idea, but it is what it is. I'd rather be open and upfront and honest with where they should be.

I think when it comes to trading options for a living and just generating an income, I've openly said and I've said it in some of our courses before that if you want to use a withdrawal amount per year of somewhere between 3% and 5% if you want to use a range, ultimately, I think that's probably a very stable level that will allow you to keep money in your account and keep it growing and leave wiggle room for drawdowns and market events that we can't yet predict. I don't know what the sequence of returns you're going to have are, but if you're in that range, that 3% to 5% range, I think you're really, really comfortable for being able to not outlive your portfolio and the income you can generate from it. Now, I know people can poke a lot of holes in 4% rule that you hear all the time and I've done a lot of research on this myself and I know that there's a lot of reasons why 4% doesn't necessarily work and you might have to be at 3% or if you have a lot of capital, you could be at 5% and be totally fine.

There's probably a lot of things out there you can take a look at like retirement withdrawal tables. You can search that online. There's really cool research and studies out there on what is the right level based on how long you expect to live and how much money you expect to drop. But ultimately, what it boils down to are basically two things. If you really look at a lot of the research on withdrawal rates and retirement and income stability for portfolios, it boils down to really two things. It boils down to where the market is at the time that you start these withdrawals. If you start withdrawals at the top of a 2000 bubble in the market or a 2008 bubble in the market or even potentially here, 2018, if the market tops this year… If you start your retirement or your options trading for a living now, you probably have to take a lower number because we might see a downturn in stocks, we might see a downturn in the economy and so, you might want to take a lower number. Now, I'm not even talking about options trading at this point. I'm just talking about the general research that's out there around stocks. And so, if you start your retirement then at the bottom of market moves, so call it 2002, 2003, also 2009, 2010, you start your retirement there or your withdrawals there, you're much more likely to be able to sustain a higher withdrawal rate.

How do we transition this to options trading? Well, obviously, if we're trading options, we can generate a higher expected return in the market. Even just a very simple covered call generates a higher expected return with less volatility than the market. That's why I think you can probably bump that up to like the 4% or 5% range in most cases and take that as a very stable withdraw from your account. Now, that still leaves ample room for growth as I think you should. My thought process on this and the way that I think about it with my wife when we talk about this is that if we're at like 3% to 5% withdrawals from our account, we're leaving a lot of room for compound growth. What people will often do and they email in and say, "Well, Kirk. If we can generate say 15% a year, why can't I take 15% a year?" I say, "Well, you could if you want to, but that doesn't leave enough room to generate compound growth." What I would rather see is people start off with a smaller amount and let that amount grow with your portfolio. The first year, if it's 5% of some number of portfolio, then next year, your portfolio grows because you only took 5% out and now, you're taking 5% of a much larger value and the third year, you're taking 5% again, a much larger value on average. That's the way that I think it should happen.

The reality is that in most cases, you can manipulate your finances and your budget to reduce cost, reduce expenses and live well below your means. I drive a minivan. I don't drive a Ferrari or a Lamborghini. I see that all the time online, these people doing this and I'm like, "That is not longevity. That thing is not going to last forever." My minivan probably won't last forever either, but you can reduce your expenses, you can budget a little bit better. We moved from DC to Pennsylvania and cut our expenses by half when we did that and we have kids. You can do things that manipulate your expenses and your budget to be able to take a lower withdrawal rate, so that you can let money in there to grow. Hopefully that helps out. As far as how much money you need, look, it depends. You can reverse engineer this based on say 5%, maybe use it as a target and then start working towards it. It doesn't mean that you should give up or quit now if you can't get to that level. You can get to that level over time and try to attack it from both angles. Try to save more money by reducing your expenses and that helps get you to that point just that much faster. Hopefully this helps out. As always, if you guys have any questions, let us know. Until next time, happy trading!

Hey everyone. This is Kirk here again at Option Alpha and welcome back to the daily call. Today, we are going to be talking about why you shouldn't use your day job as an excuse for not trading options. I do see this a lot. I see people using… In this case, we'll just say your day job or your regular job as an excuse for why you shouldn't be trading options. But I don't think it's just that. I think there's other things that people use as excuses or crutches, if you will. They use kids, they use their wife, they use their basketball team. I've seen people use their kid's swim practice as excuses. "I can't trade because they have swim practice every day." But ultimately, I think you should find time to trade if it's important to you and I think frankly, your money is important to you or it should be important to you. You work really hard for your money, as do I and I wouldn't want you to just blow it and throw it into the market. I'm actually just fascinated by that whole concept that people have or just this underlying psychology in the world that money that we earn and we work so hard for should just be given up to somebody else or to the market or a brokerage house or a financial advisor. It's fascinating to me that people work so, so hard to earn their money and care so much about their job and what they do in budgeting and then when it comes time to actually invest their money, they don't think that they have an obligation to really work hard at that as well. I think you do. I think you owe it to yourself to make sure you understand what the heck you're doing with your money and where it's going. I don't think a job or a swim practice or anything is an excuse. I think you can find time in the day to make trades. Yes, your job might not have internet access to get to the markets or your broker platform might be locked out. Find a way around that. Can you trade at lunch? Can you take a break? Can you place your trades early in the morning and use contingent orders? There's a way to do it. You just may not be looking at that avenue right now. You got to be creative in how you approach this.

The second thing I'll say on this is that as you've probably heard by now or you have been hearing about our new auto-trading platform that's going to be rolling out in the next couple of weeks… We don't have a definitive date right now, but we're exceptionally close to rolling it out. That is the premier reason why we're doing this, is for people like you that have limited time and even like me. I think there's a lot of reasons why a fully automated trading platform which literally nobody has in the entire market… This is revolutionary software that we're going to be rolling out to everybody. Nobody in the market has this and it's because I want to and our team wants to overcome this time hurdle or this time challenge that everybody has. Everybody wants to trade. I think a lot of people want to trade. Everybody understands trading, but what they don't yet have is the ability to make trades or use a system or a bot to make trades based on a strategy or assumptions. Everything right now has to be manually clicked. That creates its own challenges. Everything has to be clicked. I've got to click through all my trades, you've got to click through hall your trades and that's a hurdle that now, we're going to cross over to where we can build a bot or a strategy that does everything we try to do automatically without us having to interact with it unless we want to. That is really, really cool stuff and I think that will also help because now, you won't have truly an excuse. You won't have an excuse to say, "I don't have enough time." or "I don't have time in my day. I have my kid's swim practice." whatever it is. That will no longer be an excuse. You will only be limited by the ability to just truly go in for an hour or two maybe at tops. Usually, it's going to be like 10 minutes or so just to clone a bot or clone a strategy and get it setup and go, but after that, it's going to be on autopilot for you and that's really, really cool. I still think though, if you're trading and you use your job as an excuse, I think you can work around it. Try to figure out a way you can do it and of course, let me know if you have any questions. Until next time, happy trading!

Hey everyone, Kirk here again and welcome come back to the daily call. Today, we are going to be answering a question that came in from one of our users which was "When do you cry uncle and give up on adjusting an options trade?" I think this is a fascinating topic because I like the idea of just crying uncle and giving in. I think actually, a lot of people give in too early. I'll mention that when you make an adjustment to a trade or when a trade goes wrong, there's probably a lot of things that you can do either early on in the cycle or even late as you get towards expiration to reduce risk to some degree. You can roll strikes, you can roll the entire position, you can add corresponding legs if you're doing a one-sided trade, you can turn it into a neutral trade. There's actually probably a lot of things that you can do to a trade that's going bad or going wrong early on.

But when do you give up? I think this is really the topic of what this person was getting to. After you've done all of those things, assuming you have, when do you just give up on adjusting the trade? I think you give up in two scenarios. One, you give up when there's no value to be gained from the adjustment. What I mean by value is that if you can't adjust and reduce risk, it's not worth adjusting. If you want to roll down a strike price and that roll down might give you $5 of premium, but might increase your risk because you had to roll a strike by $200, well, taking on $200 of risk for an additional $5 is not worth it to me. I just would not make the adjustment. To me, that's no true value. Again, that's going to be different for different positions and yes, there's a little bit of subjectivity in that. Value for you is a different value for me. I think when there's no value to be gained by the adjustment, it's not worth doing the adjustment.

The second time I would say it's not worth doing it and you should basically give up on the trade and cry uncle is when you can't move the position or extend the duration. We recently went through this a lot with expiration where we actually have been in a position in TLT where we've been able to roll the position twice. From January to February, February to March… I think it was actually February to March, March to April that we actually rolled the position. But we still have the ability to roll for a credit and extend duration, so we're going to keep moving the trade out. The trade wasn't profitable in February, but we could roll it. It's not profitable or wasn't profitable in March, so we could roll it and we'll see what happens in April. If it's not profitable in April, at least we gave ourselves an opportunity and reduce risk along the way. If you can't roll for a duration like that and you can't roll for value or credits, it's not worth doing.

It's not worth paying money to say I'm right and I always tell people that a lot. I'm never going to pay money to move a position out to the next month which is basically increasing the risk just for the sake of saying potentially I'm right on a video or a podcast. It's just never worth it. I think those are the two scenarios when I would I guess cry uncle and give up is if I couldn't gain any value from it and I couldn't extend the trade's duration. Hopefully this helps out. Again, if you guys have any questions, we'd love to hear them. We have a laundry list of questions that we want to get to, but we're always looking for new questions. Head on over to optionalpha.com/ask. That's the best way to get your question answered and get it into the queue here for the daily call. Until next time, happy trading!

Hey everyone, Kirk here again from optionalpha.com and welcome back to the daily call. Today, I'm going to go over my top four reasons to sell straddles and strangles. Straddles and strangles for those of you who are not familiar with them are pure naked option selling strategies. Straddles are where you sell the same strike price on both sides. You sell the 100 call and the 100 put. With a strangle, you'd be moving further out from where the stock is trading. If the stock is trading at $100, you might sell the 105 call and the 95 put. But in either case, they're both naked option selling strategies where you have undefined risk and you're not buying any strategies or creating any spreads.

Now, to tell you honestly, these are two of my favorite strategies and we do very synthetic versions of these a lot. We trade a lot of iron butterflies, iron condors, but we also do a lot of straddles and strangles. I think it'll be personally interesting. I'm interested to see what I do personally with myself. It's like I'm talking to myself in the third person. I'm interested to see what Kirk does (my new self) when we get this new auto-trading platform live with how we're going to go about trading straddles and strangles versus iron condors and iron butterflies. I imagine and I hope that I start gravitating a little bit more towards pure naked option selling in its raw form because I want to not only do it for my own account, but I want to prove its validity in a more public way with these auto-trading bots which you can then see and clone and mimic what I do from that side.

So, to get back to why I think that these things are so good, here are my top four reasons. Number one, it's pure option selling. We said that already, but what does that mean? It means that in this case with straddles and strangles, you're not buying any options. You truly are doing option selling in its purest and most raw form, but that means that you have additional risk. The downside to that is that when you do pure option selling, you take in more money, you generally have a little bit more risk. My number two point is that they're really easy for adjustments. Unlike iron condors and iron butterflies where you have to worry about the location and the strike prices of the long legs, with straddles and strangles, it's a lot easier to adjust. You can still go inverted, you can still roll. It just makes it a lot easier because you don't have to worry about extra contracts. As far as management goes, it's a lot easier.

Number three is that they have faster decay. Again, because they're pure option selling strategies and you don't have to buy another leg to create a defined risk position, you generally see faster decay in the value. Most of the time, that means that you can take these positions off a little bit sooner when they hit their profit targets. If you're trading a spread, a spread might take a little bit longer. As you go through expiration, you might have to hold it a little bit longer before it hits its profit target. Number four is that it's more profitable if you can handle the volatility. One of the things that we learned in our profit matrix research which you can check out on our website is that straddles and strangles absolutely are very, very profitable strategies, but the profitability of those strategies comes with a little bit more volatility in the account, meaning that with the undefined risk nature of these positions, you're going to see a little bit more ups and downs along the way, but ultimately, you should generate more total dollars than other strategies out there.

Again, that's one of the reasons why I think we'll be gravitating maybe a little bit more initially to straddles and strangles in its purest format when we release this new auto-trading software, so that we can see some more of that long-term profitability start to shape out. That's going to take some time. It's going to take some time for these bots to really mature as far as number of trades and frequency, but ultimately, I'm thinking like four or five years out from now, that's where I want to be. I want to have a good backlog of those trades in place. Hopefully this helps out. As always, if you guys have any questions or comments, let me know in the comment section on the website or on Facebook or Twitter. Hit us up anywhere. And of course, add your questions in. We're always looking for new questions for the daily call. Any topics you want to see me cover, just shoot me an email or head on over to optionalpha.com/ask which is the best way to get your question answered here on the show. Until next time, happy trading!